# What are differences between EBITA and operating income?

Banking & FinanceManagementCompanies/Organisations

The major differences between EBITA and operating income are as follows −

## EBITA

• EBITDA is defined as sum of EBIT, depreciation and amortisation (or) sum of net profit, taxes, interest, depreciation and amortisation.

• It tells about company’s profit earning capacity.

• The earning capacity of an organisation is calculated.

• It is not recognised by GAAP.

• It is calculated prior to operating income calculation.

## Operating income

• Operating income is defined as difference between net sales, cost of goods sold and operating expenses.

• It tells about the profit earned due to operating activities.

• It calculates how much revenue is converted into profit.

• It is recognised by GAAP.

• No adjustments (depreciation/amortisation) are required.

• It is calculated after EBITA calculation.

Published on 27-Jul-2020 11:32:16